Purchasing Existing Business

GraphicTees · February 22nd, 2011, 09:02 PM

Hi All,

I hope all you knowledgeable can provide me with some words of wisdom. I have a family friend who is trying to sell me her screen printing business that has been open for 15 years. A divorce 5 years ago has led her business to decline financially. It's not as efficiently ran when her and her husband were running it together.

The divorce resulted it her losing a lot of clientele. Her customer service is horrible, he does absolutely no advertising. The business i staying afloat off of repeat customer. The sad thing is that some of her old clients that use to use her full time are not giving her left over business they can't handle.

From observing the business, I see that customer service suck, she's only making money off printing and only staying afloat off of small orders and orders from other shops that are trying to meet their deadline.

She is trying to sell me the business for 100k. I have business experience in the automotive world and like this business. I just don't know how to operate the machinery.

Will learning how to operate the machinery be difficult. Once I acquire the business she will stick around but I don't want to be left in a situation where, she leaves and her whole crew leaves and im left with a business that I don't know how to operate. How do I determine if this business is even worth 100k? I know it once was worth much more than that and I know with my marketing/advertising abilities i could possibly get it back up there.

I would appreciate your 2 cents on this. Much appreciated!

Thanks...Robert

Blue · February 22nd, 2011, 09:14 PM

Honestly the business is only worth whatever the used equipment is worth.

Change the name because she ruined it

SClow303 · February 22nd, 2011, 09:17 PM

And for 100K that better be some good equipment!

SClow303 · February 22nd, 2011, 10:23 PM

Here is the way I look at it and I have bought out several of my competitors. They MAY have a clientele base but that simple fact is that in business I could steel them away with a little hard work. When I look into buying I look at there physical assets. The business they have been doing with others may or may not come along with it. They can tell you they are giving you their clients but it is really not up to them in the long run. I had one shop in my state offer me their shop but it was WAY overpriced.... I just was not interested in the equipment for that amount of money. Within 2 months I was doing most of their clients business anyways and they are all over an hour away from me. I did a job for one.... who spoke to another.... who spoke to another and so on. I saved myself a lot of money and time selling their low end equipment back off.

Blue · February 22nd, 2011, 10:34 PM

Quote:

Originally Posted by jesterapparel

Not exactly, what does her books say?
Is she making a profit and how much?
What are her sales?

Blue, your telling me if I had $1,000,000 in profit a year, and my equipment was worth $100,000. My business is only worth $100,000?

The way he explained it though, it does sound like it may not be worth to much more than the equipment. Can't tell without the sales and profit numbers.

Jester,

A divorce 5 years ago has led her business to decline financially. The divorce resulted it her losing a lot of clientele. Her customer service is horrible, she does absolutely no advertising. The business is staying afloat off of repeat customer. The sad thing is that some of her old clients that use to use her full time are now giving her left over business they can't handle.

Would you trust her books?

Your last sentence shows you agree with me. lol

Blue · February 22nd, 2011, 10:46 PM

Usually, the business alone is worth 2 times what you show on your books for the year, plus equipment. But in this case. the price of used equipment only.

The sad thing is even if you changed the name, people remember the shop at that location was no good.

If you could get the equipment at a steal, I would relocate the shop or place a large billboard on the side of the building.

New Owner, New Management.
We treat our clients like family.
Quick service Great quality.

or

Better Technology ... a Better Relationship ... at a Better Price

mommyforhire · February 23rd, 2011, 09:33 PM

As Blue said....A business that is run down or not providing good customer service Is only worth what the equipment is worth...(sellable assets)...If they have not been keeping good customer service, the clients most likely are looking elsewhere as we speak.......You should be very careful on a deal like this, Sounds like you know very little about it.....And that is not very good at all when thinking about a $100K purchase.........Have the equipment appraised and leave yourself about a 20% under safety net......and that is what you should pay for it.....Otherwise you will most likely end up losing money on the deal.....just my 2 cents

Blue · February 24th, 2011, 03:09 AM

Quote:

Originally Posted by GraphicTees

She is trying to sell me the business for 100k.
Thanks...Robert

hhhhhhmmmmmmmm

100K

I wonder where she got that number?

I think she is under the "Obama Plan".

100K is her bail out!